Moving ever Moving Forward (towards the cliff)

This past week the Public Utilities Board (PUB) accepted a few applications (and denied a

Publius

few others) for intervener status at its upcoming fall 2013 Needs for and Alternatives To (NFAT) review of the government’s plans for the construction of two new hydro-electric dams (Keeyask and Conawapa). The NFAT is part of the government’s ‘full speed ahead’ and ‘dam the torpedoes’ approach to its Hydro development plans.

Publius, for the reasons set out below, shares former PUB Chair Graham Lane’s description of the planned NFAT, it is, as he has said, a sham. (Also, see a previous Publius post: “Show Trial on the Red”).

In fact, there has been considerable and appropriate criticism of the upcoming review.

The criticism has several dimensions — timing (the review will come well after a billion or more has already been spent by Hydro on the overall development plan, along with commitments made to First Nations, American utilities, trainee Hydro employees, etc.); restrictions on PUB’s mandate (government has determined that PUB will not review or question either the construction of Bipole III, which, it seems evident, is to be undertaken ‘come hell or high water’; contracts entered into by Hydro with First Nations to share ownership in the dams; or, transparently review Hydro’s export contracts and term sheets, despite the fact that the ultimate party at risk is Hydro’s ratepayers and the Province’s taxpayers); the lack of independence of government represented in the persons of the PUB panel, all appointed by government; the cost (lawyers, consultants, interveners and advocates will likely bill millions before the review is completed, costs that will be eventually reflected in Hydro’s monthly electricity bills to ratepayers – this following a quarter of billion and more dollars that have previously been spent by Hydro on lawyers, consultants and projects to gain First Nation cooperation, all related to the current development plan); and, prejudicial (to PUB’s NFAT) statements made and repeated again and again by the Premier and his Cabinet colleagues before the review even begins (indicating that the overall Hydro development plan, currently forecast to cost $33 billion over twenty years, will proceed).

All of this ‘activity’ should not divert ratepayer/taxpayer attention from Hydro’s major concurrent activity, that being proceeding with plans and expenses for and related to a west-side routed Bipole III. Just as is the case with the overall development plan, Bipole III has also come under heavy criticism, and, once again, the criticism is warranted, and hasn’t been effectively responded to.

Arguments solidly-based on changes that have occurred in the economy and in Hydro’s market area since government arrived at its stupendously expensive plans for the Crown-owned monopoly call for, at the least and most immediate, a deferral of Bipole III.

The case has been made that there are alternatives available to the current development plan, alternatives that could materially reduce Hydro production costs, future Hydro rate increases, and the overall risks associated with the development plan, alternatives available, less costly and less risk for the benefit of ratepayers, taxpayers and the provincial economy.

No more should be spent on Bipole III until a proper, expert and independent review of the overall development plan and options thereto has taken place.

The government’s strategy is to build Bipole III come ‘hell or high water’ – avoiding criticism as best as possible by preventing even its own agency’s (PUB’s) NFAT review from questioning it, because, in part, once Bipole III is built the government’s case for another hydro-electric dam is, at least on face value, made stronger.

And, without Bipole III there will be no further new northern dams built over the near to mid-term. (The last one, Wuskwatim, ended up costing twice the estimates made just before construction began, while is delivering half the revenue it was expected to produce – losses of $100 million a year are projected (each $100 million is equivalent to a 8% rate increase).

Without another hydro-electric dam, increased electricity exports to the United States (at the low prices the market allows, spot prices being one-third to one-quarter of the marginal cost to produce) , another First Nation partnership (the current one is being revamped because it produces losses for the First Nation, not the promised profits) , the hiring of hundreds if not thousands of new employees, the engaging of contractors and manufacturers required to build the dams, and huge additional revenue flows to the government’s Consolidated Fund will not occur.

While proceeding with the present plan can be expected to meet the government’s objectives, see above, the parties at ultimate risk remain the ratepayers and taxpayers of this Province. It is the ratepayers that, even based solely on Hydro’s current projections, will be required to pay much higher rates and carry the risk of even worse results developing over time.

The ‘Show Trial on the Red’ (PUB’s upcoming NFAT) should be put on the back burner, as should be the construction of Bipole III. There are just too many doubts and risks, too many unanswered questions, and lack of penetrating analyses produced by independent experts. Once built, Bipole III cannot be ‘repealed’, and the risk is too high to proceed ahead of the entire plan being dissected expertly, transparently, and comprehensively.

If a proper review led to a deferral, cancellation or major revamp of the government’s plans, it must be know that there would be consequences. These could include charges against the government’s own summary accounts as intangible and deferred assets and costs now carried on Hydro’s books were written down. Painful as such a circumstance would be, for taxpayers as well if it affected core service delivery, the twin mantras (‘your first loss is your best loss’, and, ‘don’t put good money after bad’) are often true.

The ratepayers and taxpayers of Manitoba should not be put at risk by a commercial adventure insufficiently supported by proper analyses being undertaken by a monopoly directed by a conflicted government.